Subject: - Management of Co-operatives Project on: - Commonality approach in respect of Co- operative & Corporate Sectors and specific problems related to the Co- operatives. INDEX Sr No Contents Page No 01 What are co-operatives? and 01 Definition 02 Introduction of co-operatives 02-09 And common approaches between co- operatives and corporate sectors. 03 Problems of co-operatives 09-12 04 Remedies of the problems of co- 12-13 operatives. 05 Conclusion 13 COMMON APPROACHES WITH REGARDS TO CO-OPERATIVES AND CORPORATE SECTOR What are co-operatives? Co-operatives are organizations that are owned, controlled and used by their members. They exist to deliver benefits and welfare to their members. They can be structured so that the profits are put back into the co-operative or distributed to members. Co-operatives are regulated and supervised by the Office of Fair Trading's Registry of Co-operatives and Associations. The Registry of Co-operatives & Associations regulates two types of co-operative organizations. The first types are those registered under the Co-operatives Act 1992 and the second types are those registered under the Co-operative Housing & Starr-Bowkett Societies Act 1998. Definition The International Co-operative Alliance (ICA), an independent, non-government association established in 1895, which unites and represents co-operatives worldwide, has given the universally accepted definition of a co-operative as being: “…an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise”. Co-operatives are people-centered businesses which are member-owned, member- controlled and member-used. They are distinguished from other forms of incorporation by their participative ownership, their democratic structure and their use of capital for mutual rather than individual benefit. Introduction As co-operatives are integral part of economy, they have a lot in common with corporate bodies. A co-operatives organization operates on the lines of the Corporate sector. In a professional approach, an organization is a structure managed by a group of individuals who work together towards a common goal. Let us explore the common approaches co-operatives and corporate share: BUSINESS The main aim of a business is to earn surplus revenue, and satisfy its members i.e shareholders. A business operates within both an external and an internal environment (micro and macro environment). CO-OPERATIVES: A co-operatives main aim is to serve the needs of its members and to earn excess (surplus). CORPORATES: A corporate body has to earn a profit so as to satisfy its shareholder. STAKEHOLDERS An organization’s primary role is to maintain good relation with its stakeholders, which include suppliers, dealers, retailers etc.. stakeholders are the backbone of any business. CO-OPERATIVES: A co-operative has to maintain good relation with its stakeholders, which include raw material suppliers, distributors etc., to transfer its products from rural to urban markets. It all depends on the distributors, as the channels are lengthy. CORPORATES: A corporate also has to maintain good relations with its stakeholders- its stakeholders include suppliers and distributors as well. SECTORS An organization has to operate within its functional areas, and also within the industry as a whole. There are a lot of similarities between cooperatives and corporate with regards to the area of operation. It is also known as area of operation. CO-OPERATIVES: They operate in sectors like banking, sugar, electricals, healthcare, fertilizers, food processing etc, CORPORATES: Corporate also operate in similar sectors; their operations, however, are on a larger scale compared to co-operatives. GOVERNANCE An organization has to be professionally managed in order to conduct business effectively, and in a professional manner. In order to ensure the above, the board of directors appoint managers who help in the day-to- day functioning of the organization. CO-OPERATIVES: The members in a co-operative appoint the managing committee, who in turn appoint the chairman. CORPORATES: In the corporate world, the owners (the shareholders) appoint board of directors, who appoints a CEO, who in turn appoints the chairman. LEADERSHIP A good leader is the driving force behind an organization’s success. He is the main proponent in decision-making processes, generating new business ideas, etc. CO-OPERATIVES: A leader is a visionary, a motivator, a major influence- his main job to motivate people to join the co-operative sector is Dr. Varghese Kurien. CORPORATES: The leader in a corporate is a strategist and a decision maker, like Narayan Murthy. In both corporate and co-operatives, the leader plays an important role in the business. MEETTINGS Meetings take place in an organization for various purposes such as planning, the organizing the future course of action, and effectively run the enterprise. CO-OPERATIVES: There are many types of meetings held in co-operatives-Statutory meeting / First General Meeting, Annual General Body Meeting, Special/Extraordinary Meetings. CORPORATES: Corporate hold a series of meeting like the Annual General Meeting, Statutory Meetings, EOGM, BOD Meetings, Crisis Management Meetings etc., to discuss important issues related to business. Meetings are an integral part of both the co-operative and the corporate world. ACCOUNTABILITY All businesses are accountable to their owners (members/shareholders); without accountability, an organization cannot prosper, and become corrupt. CO-OPEARTIVES: Co-operative is accountable to its members, and has to provide better returns on their investments. Moreover, it has to provide society wit high quality products at reasonable prices. CORPORATES: Corporate are accountable to their shareholder, and to society at large. REGISTRATION An organization has to register itself with the Registrar of the Industry. Only after registration can an organization form a business that provide the guidelines and framework within which it has to operate. The committee generally formulates policies in accordance to standard format developed by the Registrar of the Organization. CO-OPEARTIVES: Every co-operative has to Registrar of Co-operatives. CORPORATE: Every corporate has to register itself with the Registrar of Companies. It’s only after registration that an organization becomes a legal entity. Registration gives birth to an organization. Both co-operatives and corporate have to operate according to the policy framed by their concerned organization. SOCIAL RESPONSIBILITY An organization’s main motive is to make a profit, and to provide for social welfare. Every organization has to perform some social activity in accordance with company rules. CO-OPERATIVES: Co-operatives mainly operate in order to provide welfare to their members and to society, by providing the latter with quality goods and services at very reasonable prices, by organizing welfare programmes, by using the environment friendly technology, and by providing employment opportunities. CORPORATE: Similarly corporate also perform welfare activities by organizing festivals in village, providing employment opportunities, quality products, proper remuneration, good working conditions and fair returns on investments, and making proper use of funds. Regulatory Bodies There are many regulatory bodies that govern the workings of specific sectors like software, textiles, dairy, steel, etc. These bodies generally lay down the rules and regulation of running an organization. They also provide guidance to certain companies. CO-OPERATIVES: Many regulatory bodies have been formed to control, promote, and develop the co-operatives in villages and in rural areas. They also organize many programmes concerning agricultural inputs, processing, storage and marketing, as well as awareness seminars on the benefits of forming co-operatives with the funds for development activities, go- downs, processing units, etc. An example of just such a governing body is the National Co-operative Development Corporation. COPORATES: Here, regulatory bodies control the working of the corporate, fair business practices shareholders’ meetings, the misuse of funds collected from shares, etc. These organizations regularly inspect the companies’ accounting practices, and maintain the minutes of meetings conducted by them-two examples of corporate regulatory bodies are SEBI and NASCOM. Problems of Co-operatives & their Remedies Problems In spite of a historical record of co-op movement, still we are facing problems which have hampered the development. 1. Government influenced: Recent years have shown an increasing interference of the government by imposing restrictions, which has seriously hampered the democratic function. Further the corrupted political ideas have taken co-operatives as their personal kingdoms, which has seriously hampered the purpose of co-operative movement. Government has practically influenced the co-operative movement as the major parts of the financial assistance still come from the government and therefore it has not really reached the peoples movement. 2. Political Influence: The political influence and pressure on officials in day to day function granting of loans to undeserving people, corruption amongst officials is sickening the co-operatives. The political interference and administrative high handedness has been the root cause for loosing the purpose. Further growing vested interests, ineffective federal structure and reliance on government shows the dependency which is coupled with the processing handled by several departments, lack of co-ordination and export guidance have together arrested and influence co-operatives. 3. Bureaucrats on deputation: Appointment or deputation of government officials has proved to be harmful as well as anti-democratic. Further these bureaucrats are more rules bound and less business like in order to complete the procedures they sacrifice the business opportunity. The expenditure incurred for these bureaucrats are much more and acts as a financial burden because equally qualified people can be recruited at much lesser cost from the open market. 4. Problems of deduction: A pathetic state of socio-economic structure, poverty and illiteracy has been a reason due to which the members fail to elect a leader who is wise, efficient and capable and therefore a leader from outside becomes the only choice. The co-operative movement has concentrated more on providing or rather than on the allied infrastructure, which would have made the co-operative movement more profitable and served the fundamentals purpose of economic upliftment of the members. It was recommended by all India Rural Credit Survey report of 1954 that it is necessary to have an integrated scheme of co-operative development rather than merely or co-operatives. 5. Confined to Credit Co-operatives: The Co-operative Credit Society has been providing loans only for agricultural operations and did not extend loans to meet the other requirements of the farmer because of which they had to depend on the moneylenders and the resulting exploitation thus it could not be achieved. 6. Small size: The primary agricultural co-operatives have been very small with a limited area of operation but the liability has been unlimited. Also the honorary workers were expected to work much more which adversely affected the successful working of co-operatives. 7. Management in wrong hands: Management of most of the co-operatives has been in the hands of the illiterate, ignorant and untrained people who were unfit for the work entrusted on them. 8. Conflict within societies: Intra society conflicts have also been a serious retarding factor. Under these circumstances a society will either not do much work or favoritism and hypnotism would play the role in controlling the funds and in the process restricting the funds to few favored members. 9. Excessive over dues: A major problem of many societies is a high percentage of outstanding and low recovery rates. 10. Unproductive loans: Large loans have been given for unproductive purposes and that too the people who have concealed or hidden their own debts. The management has also been reluctant to take action against the defaulters. 11. Lack of funds: The main problem of the co-operatives is lack of funds. This is because the members do not save or deposit enough of their savings to contribute to the working capital of the organisation. Besides, there is also lack of response from general public. Hence, most co-operatives organisations fail to attract the desired deposits. 12. Lack of professionalism: The co-operative sector is still an underdeveloped sector of the Indian economy. Under the 5-year plans, keeping in mind the ultimate socio-economic goals, appropriately enough with state recognition guidance a number of co-operatives were set up. While the quantitative coverage on account of government support, one can come across very few well-managed, large-sized and modern co-operatives. Due to the lack of professionalism, growth and development is hampered in the face of the changing management scenario in the country. 13. Problem of Member Involvement: Many co-operatives have a problem of lack of member involvement. This is because of the indifferent attitudes of the members. Also the principle of unlimited liability prevents people from joining co-operative organisations. Hence, co-operatives organisations fail to involve the desired the number of members. 14. Illiteracy: In India, people have been highly illiterate, ignorant and extremely conservative towards co-operative organisations. This is because people fail to understand the real meaning and objectives of co-operation. 15. Dual Control: Let's take an example to explain this point. The Registrar, who is a representative of the state government and also the Reserve Bank of India, controls co-operative banks. Similarly all other co-operatives have dual control. There is no one fixed line of hierarchy. This is a problem because if one employee has two bosses, he has twice the problems. 16. Problem of Diversification: It must be approved that co-operatives in India exhibit excessive sensitivity towards memberships and other aspects of the organisation and pay little attention to exploring new areas of diversification. This is a serious problem. 17. Traditional society: This is another problem for co-operatives. This is because most of the villages or small towns where co-operatives operate have members who are very traditional and conservative. Even in the competitive scene in India, it is becoming more and more difficult for co-operative to function efficiently on the basis of traditional type of management. 18. Over-riding powers to Registrars: This is again a very serious problem for co-operatives. The registrar being a representative of the State Government has been given a lot of powers. Due to rising corruption, these powers are misused to a large extent, thus posing a problem. Other problems include: 1. Unemployment 2. Poverty 3. Lack of Infrastructure 4. Unequal distribution of wealth and resources 5. Low per capita income 7. Religion fundamentalism 8. Regionalism 10. Population Explosion 11. Corruption Remedies 1. Strengthening of human resources: The deficiencies and limitation in the recruitment and training should be removed. Competent persons and individuals with a capacity and unquestioned integrity should be posted on the various responsible positions. 2. Avoiding political influence: Groupism, class-consciousness, political interference, which normally plagues should be avoided. 3. Improved recovery: It is necessary that the loans and credit facilities should reach the poor farmers and those who have taken the undue advantage should be made to repay it, at the same time it should also be avoided to write-off loans unless absolutely necessary and justified. 4. Developing a sense of solidarity: It is the most essential aspect necessary for the growth of co-operatives. If there is no solidarity among the members it will definitely affect the functioning and prosperity of the co-operatives but might also face unforeseen adversities. 5. Public Contribution and participation: It is very much necessary that the co-operatives should become self-funding rather than on government finances and subsidies. It should have more of public contribution and participation. 6. Effective leadership: The co-operatives being a people’s movement must ensure that the officers and the leaders should have and must acquire necessary training to run the co-op movement more effectively as these members will be the ones who will be able to do justice towards the cause than any outsider. 7. Multipurpose basis: The old objective, of keeping the co-operatives confined to providing credit has to undergo a change. It is necessary to expand into an allied and infrastructural service as per the purpose of the co-operatives. 8. Production plans: In addition to the primary function if the co-operative aims at expanding, improving and deciding the agricultural production it can help the villagers to specialise and pool in their resources to increase the total production and thereby achieve scale of economics. 9. Marketing and processing: After supplying credit and producing goods the co-operative movement has often faced failure because of inadequate and improper processing and marketing infrastructure and therefore this also needs to be developed. 10. Professionalism: The solution for lack of professionalism could be that the co-operative organisation must adjust by adopting new management techniques to meet the demands. 11. Diversification: The solution could be that co-operative organisations should introduce new products, new processes new techniques and tools of productivity etc. to build up its strength in the market and maintain it on a continued basis. CONCLUSION It can be inferred from the above points that a Co-operative organization function on lines similar to those of a corporate organization. However, a few differences exist between the two. If all Co-operative organizations follow a professional approach like corporate, they can succeed at being successful models of organization to bring about dynamic changes in our economy.
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